By the Select Committee on Economic Affairs
ASPECTS OF THE ECONOMICS OF AN AGEING
The population of the United Kingdom is ageing.
In 2001, for the first time in the United Kingdom, there were
more people aged over 60 than under 16. By 2051, an estimated
one in four people will be aged over 65. Much debate on the ageing
population has focused on the challenges it presents. We believe
that, just as society has adjusted to accommodate the demographic
changes that have been experienced so far, so too will it adjust
to accommodate the challenges of the future.
Inevitably, given our remit,
our inquiry focused on economic aspects, although we recognise
and appreciate social and cultural factors such as attitudes towards
older people and their needs and preferences.
Having explained the scope and focus of our
inquiry in chapter 1, in chapters 2 and 3 we briefly set out the
demographic and macroeconomic context. We identify the causes
of population ageing, and note that its economic impact is likely
to be greater in other developed economies than in the United
Chapters 4 to 6 cover employment, in relation
to participation (chapter 4); productivity (chapter 5); and age
discrimination (chapter 6). We emphasise the importance of increasing
the labour force participation of older workers. We note that
average age-specific participation rates mask much lower rates
in some regions and among some ethnic minorities and women. We
also discuss the relative importance of supply-side and demand-side
factors in the economic activity of older people.
Supply-side and demand-side factors are further
assessed in chapters 5 and 6, which discuss how older people's
capacity for work, and employer perceptions of that capacity,
affect employment opportunities for older workers. We recommend
job and workplace redesign and the promotion of skill acquisition
in order to enhance older people's work capacity, and we note
the dearth of reliable evidence on the relationship between age
and individual productivity. We advocate comprehensive legislative
and cultural initiatives to ensure the elimination of age discrimination
in both the public and private sectors.
Chapter 7 considers some of the consumption
issues that arise in relation to older people. We draw attention
to cases of market failure in the design, provision and marketing
of goods and services, and to restrictions on access to providers
of goods and services.
Chapters 8, 9 and 10 deal with retirement income.
Chapter 8 draws attention to the changing social structure and
the particular problems faced by women, who constitute the majority
of pensioners, and ethnic minorities in making adequate pension
provision. We conclude that the contributory system should be
replaced by a pension paid on the basis of citizenship entitlement.
Chapter 9 assesses the opportunities available
for making private provision for retirement, and the context in
which such provision is made. We note the factors involved in
decisions relating to making private provision, and conclude that,
despite inadequate voluntary private pension saving, further compulsion
in addition to that which is already in place under the national
insurance system is not inevitable.
Chapter 10 deals with the excessive complexity
of the public pension system and the implications of that complexity.
We note the effects of means testing, which include high marginal
tax rates and reduced incentives to save. Finally we assess whether,
and in what respects, the United Kingdom faces a pensions crisis,
and we recommend the establishment of an independent authority
to provide more stability and certainty in the design and implementation
of appropriate pensions policies.
1 "to consider economic affairs" Back